How To Create a Cost-Effective Employee Healthcare Benefits Strategy

Healthcare costs are rising, and CFOs are feeling the pressure.

With insurance premiums across the United States climbing faster than inflation and employees demanding better benefits, finance leaders are caught in a balancing act. How do you provide quality healthcare while keeping costs under control?

The answer isn’t simple, but it’s not impossible either.

In a recent episode of The CFO Show, I sat down with Anisha Sood, Chief Financial and Strategy Officer at First Choice Health, a Seattle-based preferred provider organization (PPO) to discuss how finance leaders can rethink their approach to healthcare benefits.

Healthcare expenses have become a significant and unpredictable expense for businesses, with costs continuing to rise. This uncertainty, combined with inflation and challenging market conditions, has created a complex financial landscape for companies.

In this episode, we explored creative cost-cutting strategies businesses can take, how to leverage data for smarter decision-making and why proactive investments in employee well-being can pay off in the long run.

So, if you’re a CFO looking for practical ways to navigate the complex world of healthcare benefits, keep reading. We’ve got insights on how finance teams can build a cost-effective, high-impact healthcare strategy.

The Rising Costs of Healthcare and What’s Driving Them

One of the biggest challenges CFOs face today is the rising cost of healthcare, which has resulted in similar increases in employer coverage. In fact, the Kaiser Family Foundation’s annual Employer Health Survey revealed annual family premiums for employee coverage went up 7% in 2024—and that’s after a similar 7% rise in 2023.

According to Anisha, some of the key drivers for this include:

Supply Chain Issues and Workforce Shortages

The lingering effects of the pandemic have led to increased costs for medical supplies and a reduced workforce, pushing hospitals and providers to raise prices.

“We're seeing those play through a lot of staff losses post-pandemic as well,” Anisha says. “We saw a lot of early retirements between doctors and nurses, just given a very, very high-stress environment.”

Market Consolidation

The healthcare industry has seen a wave of mergers and acquisitions, reducing competition across the industry.

“Somebody may have been an insurer five years ago, but now they own a pharmacy benefit manager,” Anisha explains. “And now they own a provider. Now they own retail clinics. That sort of vertical integration and horizontal integration we’ve seen really increasing over the last few years in healthcare.”

The result is fewer options for employees and often higher costs, limiting cost-saving options for employers and increasing the cost of health insurance overall.

Rising Pharmaceutical Costs

New, high-cost medications—particularly medications for rare disease treatments as well as GLP-1 drugs for diabetes and weight loss—contribute significantly to higher expenses.

“Pharmacy is becoming a greater and greater portion of that,” Anisha says. “We're seeing costs increase on both the medical side and on the pharmacy side.”

Cross-Subsidization From Public To Private Healthcare

United States government healthcare programs like Medicare and Medicaid often reimburse providers at lower rates. This can lead to higher rates for employer-sponsored plans, as a way to make up the difference.

“As reimbursement reduces on the government side, some of that is filtered back into the commercial side,” Anisha says.

Key Levers for Managing Employee Healthcare Costs

For CFOs, understanding these cost drivers is crucial when evaluating their company’s benefits strategy and considering alternative approaches. It can help them identify changes they can make to better manage healthcare costs.

Anisha sees three primary areas that CFOs can focus on to control healthcare costs while maintaining quality of care:

1. Optimizing the Site of Care

Not all providers charge the same rates for services. Employers can explore lower-cost care settings, such as outpatient surgical centers instead of hospitals, or standalone imaging centers instead of hospital-based facilities.

Price transparency laws now make it easier to compare costs across providers, allowing employers to encourage employees to seek more cost-effective options.

2. Managing Use Without Creating Barriers

Employees don’t typically seek healthcare services when they don’t need them. But once they do enter the system, unnecessary tests and specialist referrals can inflate costs. Encouraging proactive care management—especially for chronic conditions like diabetes and hypertension—can prevent these costly complications later on.

With that in mind, employers should explore care models that emphasize primary care as the first point of contact, reducing the need for expensive specialist visits.

3. Prioritizing Total Cost Over Short-Term Savings

Not only does getting ahead of potential health issues lead to fewer problems later on—and fewer specialist visits—but it can cut down the total cost of care overall.

For employers, that means encouraging proactive care, such as regular blood work, to address concerns early. While that may mean more costs upfront, it can lower total costs by avoiding or reducing significant medical issues.

“All of a sudden, you’ve taken something that has been underutilized upfront and increased that,” Anisha says. “So, it seems like your costs are going up, but you are absolutely saving costs downstream.”

Aligning Benefits with Workforce Needs

Anisha also stressed that a one-size-fits-all approach to benefits is outdated. Different workforces have different healthcare needs, and benefits should reflect that. For instance:

• A trucking company might need broader telehealth options for drivers on the road.
• A manufacturing firm might require robust musculoskeletal care programs due to physical job demands.
• A school district may need specialized maternal and pediatric care due to a predominantly female workforce.

Understanding employee demographics and healthcare usage patterns can help CFOs and HR leaders design tailored benefit plans that optimize both cost and effectiveness.

And just like every workplace has different needs, employees across every country in a global workforce will as well.

“Unfortunately, we have a lot more healthcare-related cost bankruptcies in the United States,” Anisha says. “The costs in general are quite a bit higher, but access also looks quite different than it might in other countries.”

For global companies, having someone in each country to guide you through the unique healthcare needs can help CFOs better navigate the differences.

The Role of Flexibility in Plan Design

With all of that in mind, Anisha highlights the importance of flexibility when designing your healthcare plan. As an example, she shared a case where First Choice Health helped a hospital increase the percentage of employees seeking care within its own network.

By improving awareness of lower-cost in-network options, the hospital increased usage of its own services among employees by about 10%. And in doing so, they reduced external spending, captured more revenue internally and improved employee health management.

• Other initiatives employers might want to consider include:
• Integrating wellness programs into your health benefits to build proactive and preventative care and reduce total costs.
• Direct contracting with healthcare providers to secure better rates and improved access.
• Introducing value-based care models that shift financial incentives away from service volume and toward better health outcomes.

The CFO and HR Partnership: Advice for Getting It Right

A successful benefits strategy requires strong collaboration between Finance and HR. While CFOs focus on cost control, HR leaders prioritize employee well-being and satisfaction.

To achieve better alignment, Anisha has two pieces of advice for CFOs:

1. Use Data To Drive Decisions

Understanding where money is being spent and why is critical for optimizing benefits So, demand transparency in your business’s healthcare spending and use data analytics to identify cost-saving opportunities

2. Challenge the Status Quo

Employers don’t have to accept off-the-shelf benefit plans. CFOs should explore alternative models like direct provider contracting, tiered benefits and value-based care structures to align benefits with business goals.

Crafting the Right Benefits Plans

Employee healthcare benefits don’t have to be a cost burden—when structured thoughtfully, they can be a strategic advantage.

By focusing on proactive care, leveraging data and working closely with HR teams, CFOs can craft plans that optimize costs while delivering meaningful health benefits to employees.

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